China's export spike masks darker prospects
China's exports surprised on the upside rising 3.5% in April despite the global impact of the coronavirus pandemic. The country exported millions of tons of medical products worth 71.2 billion yuan ($10 billion, €9.2 billion) in the March-April period, a threefold increase on the previous quarter, according to the customs agency.
Exports of medical instruments and devices rose 11% in the first four months from a year ago, according to the agency, while other sectors declined.
China's trade surplus for the period was a handsome $45.34 billion, compared with an expected $6.35 billion and a figure of $19.93 billion in March. Imports fell 14.2% year on year, a steeper drop than last month, according to the customs agency. This was due to weak domestic demand and declines in commodity prices.
ING Chief Economist for Greater China Iris Pang told the French news agency AFP that while exports of clothing fell, sales of textile yarns, fabrics and other products grew, implying they had been used to make medical supplies.
Bloomberg had predicted an 11% drop in exports in April. The figures also contrast with official Purchasing Managers' Index data, which recently showed firms reporting weak demand and a sharp drop in new export orders in April.
Catching up on lost time
Louis Kuijs of Oxford Economics noted that "April shipments may have been boosted by exporters making up for shortfalls in the first quarter due to supply constraints then." In the January-February period, the height of China's coronavirus outbreak, exports dropped 17.2%.
Some economists also attributed the rise in exports to factory closures elsewhere, leading to an increase in import demand, just as China's manufacturers reopened after extended shutdowns due to the virus outbreak.
"Not only was the global demand taking a hit from the coronavirus, but the shock to the production side was actually more pronounced last month," Nie Wen, an economist at Shanghai-based Hwabao Trust, told Reuters.
Not all rosy
Analysts were divided on future trends as China's key trading partners fall into recession. The eurozone economy is expected to contract by 7.7% this year, while the US private sector has lost 20.2 million jobs last month alone.
Given the rebound in April shipments, Nomura raised its forecasts for China's exports to minus 22% for May and June from minus 30% previously.
"China's recovery is already evident with significant domestic supportive measures lifting the growth outlook from Q2," Jinny Yan, chief China economist at ICBC Standard Bank, said.
The ongoing threat of a renewed trade war with the US is also a key factor.
The US and China signed a phase one trade pact amid their spat in January, but some believe the threat hasn't fully gone away. Julian Evans-Pritchard of Capital Economics told AFP that "the threat of additional US tariffs on Chinese goods shouldn't be ignored."
Customs data showed that in April China's trade surplus with the US widened from a year ago by 8.8%, to around $22.8 billion.